Stanley Works To Buy Black & Decker Corp. In All-Stock Deal

The Stanley Works, long a giant in American toolmaking, will buy The Black & Decker Corp. in an all-stock deal worth about $4.5 billion, the companies said Monday after the stock markets closed.

The new enterprise will be called Stanley Black & Decker and will have its corporate headquarters in New Britain, Stanley's longtime home. John F. Lundgren, Stanley's current chairman and chief executive, will be president and CEO, and Stanley shareholders will own just over 50 percent of the new company.

One of the biggest domestic acquisitions by a Connecticut-based company this year, the deal unites two famous national toolmakers with combined revenues of $8.4 billion through the end of October and minimal product overlap. The merger is expected to close in the first half of 2010.

Stanley is smaller than Maryland-based Black & Decker by sales, and both companies have been hard hit by the deep slump in housing and construction. But Stanley's growing security systems and services business — now its largest division — gives it the financial strength to pull off the deal.

"Joining these two companies together creates a powerful engine for growth, both as markets around the world recover and over the long term," Lundgren said in the statement announcing the merger.

Stanley will also gain access to Black & Decker's much-greater supply of cash: At the end of the third quarter, the Maryland company had $821 million, according to recent filings, compared with Stanley's $207 million.

Founded in 1843, Stanley, one of Connecticut's oldest companies and an icon of the state's history as a manufacturing center, makes hand tools, heavy industrial tools and security equipment. It employs about 18,000 worldwide, including about 1,300 in New Britain and Farmington.

In recent years Stanley has focused on developing an electronic security equipment and services business, one that has grown as sales and profits from tape measures, screwdrivers and heavier industrial tools have become less dependable. Stanley's 2008 sales were $4.5 billion.

Black & Decker, which is based in Towson, Md., and traces its roots to 1910, is best known for power tools. It employs more than 22,000 worldwide and last year had revenues of $6.1 billion.

The companies portrayed the deal as a combination of complementary tool producers. They said they expect to save $350 million within three years through cuts in corporate overhead and consolidation of some business units, including manufacturing, distribution and purchasing operations.

Stanley spokesman Timothy Perra said job cuts would amount to about 10 percent of the combined workforce, or about 4,000. He said it is too soon to know which work sites will take the losses: "There is absolutely no determination at this stage of the game."

Stanley has a tape-measure manufacturing plant in New Britain and operations of its commercial automatic door business in Farmington, in addition to several hundred corporate employees in New Britain.

Nick Heymann, an analyst in New York with Sterne Agee, agreed with the companies that their products generally complement each other and that the merger will allow for "significant cost reduction." Other benefits include greater pricing power with big box retailers and, for Stanley, extra cash for dealing with maturing debt, he said.

"What it doesn't do is reposition the combined companies into emerging markets," he said, noting that both companies have 85 percent or more of their sales in the U.S. and Europe.

The recession has been tough for Stanley, which reported third-quarter financial results on Oct. 21: Operating profits fell 14 percent from a year earlier, to $135 million, on a sales drop of 16 percent, to $936 million.

Stanley's security division, which provides a wide range of equipment and services, from padlocks to video surveillance equipment, was its best performer, with operating profits up 12 percent, to $84 million, on a 3 percent sales increase, to $403 million. That division benefited from acquisitions.

Stanley expects the merger to provide "greater resources to support continued expansion of our combined security and industrial businesses," Lundgren said in the statement.

As outlined, the terms of the deal call for Black & Decker shareholders to receive 1.27 Stanley shares for each Black & Decker share, or $57.56 at Monday's closing price — a 22 percent premium over Black & Decker's closing price, before the deal was announced. Shares were in the $57 range in after-hours trading.

The two companies' share prices have recovered more or less equally since hitting bottom on March 9, when Stanley closed at $22.75 and Black & Decker, $20.35. Stanley had fallen from highs just over $60 in 2007, while Black & Decker had been above $90.

Stanley finds itself in a stronger position now than in 1992, when Newell Co. attempted a hostile takeover of Stanley, then, as now, weakened by a housing and construction recession.

Civic leaders in New Britain received word of the merger as good news, although the local effects of the consolidation remain to be seen.

Mayor Timothy Stewart called the merger "great" news for New Britain. "It's going to make them a stronger company," he said.

The merger has been approved by both companies' board of directors, but is subject to shareholder approval and review by regulators. The companies have scheduled a conference call for investment analysts for today at 8:30 a.m.